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SEC Filings

S-1/A
OREXIGEN THERAPEUTICS, INC. filed this Form S-1/A on 02/16/2007
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time before the reassessment, certain additional adjustments for factors unique to us were considered in the reassessed values determined for the 21 months ended December 31, 2006, including:
 
  •      during April and May 2005, we completed our Series B redeemable convertible preferred stock financing;
 
  •      during April 2005, we hired our current President and Chief Executive Officer, formerly the President of the Neuroscience Product Group at Eli Lilly;
 
  •      during March of 2006, we received data to support the tolerability of the sustained release formulation of zonisamide;
 
  •      during June 2006, we completed and compiled data from a significant subset of our Phase IIb clinical trial for Contrave;
 
  •      during June 2006, we began enrolling patients in our Phase IIb clinical trial for Excalia;
 
  •      during September 2006, we expanded our management team by hiring additional senior officers; and
 
  •      during November 2006, we completed the sale of our Series C preferred stock financing.
 
Stock-based compensation expense for the period from April 1, 2005 to December 31, 2005 includes the difference between the reassessed fair value per share of our common stock on the date of grant and the exercise price per share and is amortized over the vesting period of the underlying option, generally four years, using the straight-line method. There are significant judgments and estimates inherent in the determination of the reassessed fair values. For this and other reasons, the reassessed fair value used to compute the stock-based compensation expense may not be reflective of the fair market value that would result from the application of other valuation methods, including accepted valuation methods for tax purposes.
 
During the period from April 1, 2005 to December 31, 2005, we granted options to employees to purchase a total of 2,226,793 shares of common stock at an exercise price of $0.30 per share. During the year ended December 31, 2006, we granted options to employees to purchase a total of 2,470,888 shares of common stock at exercise prices ranging from $0.35 to $3.00 per share. These fair market values of our common stock were established by our board of directors. We did not use a contemporaneous valuation from an unrelated valuation specialist because, at the time these stock options were issued, we believed our estimates of the fair value of the common stock to be reasonable and consistent with our understanding of how similarly situated companies in our industry were valued. Given the absence of the an active market for our common stock, our board of directors determined the estimated fair value of our common stock on the date of grant based on several factors, including the price of $2.36 per share at which Series B redeemable convertible preferred stock was issued to investors in April and May 2005, and the rights, preferences and privileges of the preferred stock relative to the common stock, important developments relating to the results of the clinical trials, our stage of development and business strategy, and the likelihood of achieving a liquidity event for our outstanding shares of stock. Of the $35.0 million in gross proceeds received from the sale of Series B redeemable convertible preferred stock, approximately $15.0 million was received from related parties, including 5% stockholders and certain investors affiliated with members of our board of directors. The rights, preferences and privileges of each series of preferred stock include a liquidation preference, dividend provisions, antidilution protective provisions and voting preferences, among other rights, while the common stock has none of these features. On the date of issuance, these preferences were considered significant and our board of directors concluded at that time that the common stock had a nominal fair value compared to the preferred stock, primarily because the likelihood of achieving a liquidity event could not be determined at that time. In reassessing the fair values of our common stock in connection with this offering, including the milestones leading up to the initiation of this public offering, we concluded that the value of the preferences of our Series B preferred stock should not be given as much weight and the reassessed fair value of our common stock starting April 2005 was equal to 90% of $2.36 per share, the price at which we sold our Series B redeemable convertible preferred stock, or $2.12 per share. The reassessed fair value of our common stock was increased from $2.12 per share in April 2005 to


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